Sam Fletcher
Senior Writer
HOUSTON, Oct. 14 -- Energy prices rebounded Wednesday, wiping out most losses to profit-taking in the previous session as already jittery markets were shaken by reports that a 30-in. oil pipeline exploded in eastern Mexico. Workers from Petroleos Mexicanos closed off the line and were working to contain the spilled oil.
Meanwhile, there were indications that a 4-day general strike in Nigeria might end Thursday with no disruptions of oil production or exports. However, the key issue behind the strike by the Nigeria Labor Congress remains unresolved, said analysts at Raymond James & Associates Inc., St. Petersburg, Fla. It was a "warning strike" by the NLC to get the Nigerian government to rescind the recent 15% hike in retail fuel prices—"the exact same issue that led to general strikes in July 2003 and June 2004," analysts said. "The NLC is vowing to organize a much longer one if the government doesn't meet its demands."
Raymond James analysts reported "some positive signs that the two sides are prepared to act in a constructive fashion to resolve their dispute. The strike went largely without violence, with union leaders trying to prevent unrest. Meanwhile, the government recently released several labor officials from custody as a gesture of good faith."
Political strife between NLC and Nigerian President Olusegun Obasanjo apparently is not resolved, however. "In fact, Obasanjo is presenting a bill to parliament that would end the NLC's official monopoly as the country's umbrella union association," analysts said.
US inventories
The Energy Information Administration said Thursday that commercial US crude inventories increased by 4.2 million bbl to 278.2 million bbl during the week ended Oct. 8. Gasoline stocks were up by 1.2 million bbl to 200.6 million bbl in the same period, but distillates fell by 2.5 million bbl to 120.9 million bbl. "In terms of price drivers, the tightness in distillate markets in the US and Europe is continuing to sweep all before it," said Paul Horsnell, Barclays Capital Inc., London.
"A fall in [distillate] inventories at this point is pretty disastrous," Horsnell said. "Last year the US started the heating oil season with higher inventories and just got by due to high levels of imports from Europe. This year Europe has nothing much to give, the starting inventory level is lower, the weather forecast is colder for critical areas, the refining system is more dislocated, and user inventories have been slower to build because consumers were waiting for lower prices that never came."
With diesel inventories also falling and US distillate demand up 7.4% from a year ago in October, he said, "The latest US weekly [report] is about as bullish for distillates as it gets. There is a very serious problem in distillate markets on both sides of the Atlantic, and current prices are not high enough to ease it sufficiently."
Energy prices
The November contract for benchmark US sweet, light crudes Wednesday rebounded by $1.13 back to $53.64/bbl, the same record level as Monday's closing, wiping out interim losses on the New York Mercantile Exchange. The December position advanced by 96¢ to $53.14/bbl. On the US spot market, West Texas Intermediate at Cushing, Okla., was up by $1.13 to $53.65/bbl. Heating oil for November delivery jumped by 4.46¢ to a record $1.50/gal on NYMEX. Gasoline for the same month was up by 2.8¢ to $1.41/gal.
The November natural gas contract shot up by 21.5¢ to $6.85/Mcf, "staging an impressive recovery after a very weak start," said analysts Thursday at Enerfax Daily.
In London, the November contract for North Sea Brent crude increased by 45¢ to $50.05/bbl on the International Petroleum Exchange.
However, the average price for the Organization of Petroleum Exporting Countries' basket of seven benchmark crudes lost 50¢ to $44.99/bbl Wednesday.
Contact Sam Fletcher at [email protected]
